If you’re thinking about buying a diamond, you might want to do it soon. A combination of factors is aligning to make diamonds a significantly more expensive luxury shortly.
Industry experts are predicting a surge in diamond prices, driven by a concoction of tighter supply, increasing demand, and a wave of romantic proposals on the horizon. Jewelers, who experienced a slump in sales with diamond prices dropping around 30% in 2023, are now bracing for a much brighter engagement season.
Paul Ziminsky, a leading diamond analyst, notes that the slump was especially pronounced in lower-quality and smaller diamonds, which saw their lowest prices in a decade. However, the tide is turning. The International Diamond Exchange’s Diamond Index has already begun to rise, breaking a prolonged period of decline.
The CEO of Diamond Standard, Cormac Kinney, shares this optimistic outlook. He and Ziminsky foresee a 5%-10% increase in diamond prices this year alone. Looking further ahead, the next 20 years could see even more dramatic growth, with Kinney’s firm predicting a skyrocketing trend, though an exact target price remains unspecified.
This “major disturbance in the force” of diamond pricing is attributed to several key factors. Firstly, the supply of diamonds is tightening. After a pandemic-induced overproduction in 2023, efforts are underway to reduce output. This includes actions like Russian mining giant Alrosa halting sales to boost prices. Additionally, the G7’s recent ban on Russian diamonds further constrains supply, potentially removing up to 30% of global diamonds from the market.
On the demand side, there’s an expected resurgence. After a year where Americans shifted away from pandemic-era splurging on luxury items, experts anticipate a normalization in demand for goods and luxury items. This is particularly true for engagement rings, a significant portion of the diamond market. Signet Jewelers, for instance, has observed indicators that more couples are approaching marriage, backed by a 10% increase in Google searches for engagement rings.
Kinney and Ziminsky predict a return to pre-pandemic growth trends for diamonds, which could mean high single-digit percentage increases. But the long-term view is even more bullish. Kinney highlights the growing interest in diamonds as a hard asset among investors, particularly in times of economic uncertainty marked by inflation, recession, and volatility. He estimates that investor demand could account for around 15% of all available diamonds, equating to roughly $180 billion worth of these gems.
Drawing a parallel with gold, which saw a 500% price increase since becoming easily tradeable in an ETF in 2003, Kinney anticipates a substantial rise in diamond prices over the next two decades.
This bullish forecast for diamonds stands in stark contrast to the recent downward trend in other commodities and collectibles. Luxury watches, fine wines, whiskey, and trading cards all experienced price crashes in 2023, with no immediate signs of recovery.
For investors and luxury goods enthusiasts, the diamond market’s impending shift offers a unique opportunity. Unlike other speculative investments that have waned in the current economic climate, diamonds are poised for a significant and sustained increase in value, making them an attractive asset for both personal and investment purposes in the coming years.